San Jose spends 45 percent more on salaries and benefits for the average city worker than it did in 2000 – a growth rate roughly double the national averages for local government employees and workers in private industry.

City figures compiled at the request of the Mercury News also show that costs for retirement and health care benefits for city workers have risen three times as fast as salaries since the dot-com bust, even as many other local workers in the private sector have had to pay more for health insurance that offers fewer benefits.

Swelling personnel costs – currently almost two-thirds of San Jose’s nearly $1 billion operating budget – are key to an ongoing deficit that has plagued the city for the last half decade. The city council is in the midst of trying to close a $16 million budget gap and has projected deficits for at least the next four years. Mayor Chuck Reed is expected to address the city’s financial crunch in today’s State of the City speech.

But until the Mercury News requested the information, city officials did not keep a rolling report showing how benefits and other costs have risen for public workers.
San Jose officials said Tuesday they believe their growth in personnel costs is more or less in line with California’s other large cities that must contend with high housing prices and soaring health care premiums.

“We’re not alone,” said Alex Gurza, director of employee relations. “The significant increase in pension costs and health care costs are not only not unique to San Jose, but common to both the public and private sector.”

Figures from the federal Bureau of Labor Statistics, however, tell a different story. According to those national averages, total compensation rose 21 percent for state and local government workers from 2000 through 2006 and 18 percent for private industry employees.

San Jose’s figures showed the total budgeted personnel costs for employee salary and benefits rose 42 percent since 2000 – from $515 million to $731 million.

The cost of an average San Jose city employee rose 45 percent over that time, from $74,000 in 2000 to $107,000 today.

Helping to fuel that steady climb have been new contracts with generous health care and retirement benefits. San Jose police officers, for instance, can retire after 30 years with a pension equal to 90 percent of their highest salary – and health care for life.

Employee salaries in San Jose rose 33 percent since 2000 – about the same rate reported by San Francisco. But San Jose’s employee health care costs rose 99 percent during that time, compared with 90 percent in San Francisco. And San Jose retirement costs rose 96 percent during that time, compared with just 6 percent in San Francisco.

Tom DiSanto, San Francisco’s budget and revenue manager, explained that his city used to pay its employees’ share of retirement costs, but during the economic downturn of the early 2000s, employees were asked to pay their share.

Erik Larsen, president of the Municipal Employees Federation, the city’s largest bargaining unit, said the costs need to be kept in perspective.

“Your average city worker is barely keeping up with the high cost of living in the Santa Clara Valley,” said Larsen, whose group represents 2,500 city workers, including emergency dispatchers, librarians, janitors and recreation leaders.

San Jose’s employee cost increases are most dramatic for police and firefighters. The average cost of those workers rose 52 percent since 2000, with salaries increasing 37 percent, retirement growing 121 percent and health and other benefits rising 113 percent.

All told, the average cost of a police officer has risen 55 percent – the most of any group of city employees – from $91,000 in 2000 to $141,000 now. The average cost of a firefighter has risen 47 percent, from $91,000 to $133,000 today.

For all other city employees, the increase since 2000 has been 30 percent in salary, 79 percent for retirement and 93 percent for health and other benefits.

Larsen said city workers have forgone raises and made other concessions to help the city through lean times and have difficulty competing in a valley where monied high-tech workers drive up the cost of living.

“A half-million dollars for a fixer-upper – that’s what many city employees are faced with,” Larsen said.

John Woolfolk is a reporter for the Bay Area News Group, based at The Mercury News. A native of New Orleans, he grew up near San Jose. He is a graduate of the UC Berkeley School of Journalism and has been a journalist since 1990, covering cities, counties, law enforcement, courts and other general news. He also has worked as an editor since 2013.